GAAR will kick in from April 2017

  • In the 2016 year end review, CBDT the apex policy making body of the IT dept declared GAAR will kick in from April 2017.
  • Legislation against tax avoidance, GAAR or General Anti Avoidance Rules is on a long list of CBDT achievements.

Legislations enacted in 2016-2017

  • Enactment of The Benami Transactions (Prohibition) Amendment Act, 2016,
  • Implementation of The Direct Tax Dispute Resolution Scheme, 2016
  • General Anti Avoidance Rules 2017

Regarding GAAR

  • In May 2016, consultations were started with stakeholders asking clarity for implementation of GAAR.
  • GAAR is part of the 2012-2013 Budget speech of then FM Pranab Mukherjee.
  • It is a legislation to check tax evasion and avoidance.
  • GAAR was initially not implemented because of the concerns of foreign investors.
  • It was originally to be implemented from April 2014. It will come into effect from April 1, 2017 (assessment year 2018-2019).
  • The Rules contain provisions permitting the government to prospectively tax overseas deals involving local assets.
  • Foreign investors have objected to GAAR, saying it could be used to target P-notes as indirect investment. This would attract tax rate of 15 percent.
  • Investor may then have to set up P-Notes to specifically avoid paying taxes. In the Budget 2015, GAAR was deferred by two years.

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